The S&P 500 Sets a New High - Spotlight on Microsoft and Amazon as Long-Term Buys

The S&P 500 has once again made headlines by scaling new heights, registering a historic peak at 5,321.41 on May 21. Despite a marginal retracement since that pinnacle, the surge is supported by an uptick in the economy, steady interest rates, and notably, the significant performance of artificial intelligence (AI) stocks. Renowned analyst Tom Lee from Fundstrat Global Advisors has even predicted a potential climb to 5,500 by the end of June.

Investor caution is natural when markets hit such levels, however, savvy investors recognize the rewards of holding onto growth-driven enterprises. Microsoft (MSFT) and Amazon (AMZN), each with substantial market presence and continued scalability, stand out as prudent long-term investments even amidst a booming market.

Microsoft's Sustainable Edge

Microsoft has carved out a secure niche, thanks to its synergistic partnership with OpenAI, the minds behind ChatGPT. This collaboration has resulted in the rollout of AI-integrated services alongside its fundamental offerings, enhancing products like Azure AI and Copilot. The latter, an AI assistant, has been integrated into a collection of productivity tools.

The tech giant's third-quarter fiscal 2024 financial report shone brightly with Azure's 31% year-over-year revenue leap, 7 percentage points of which can be attributed directly to AI. With Azure being the choice platform for an increasing number of Fortune 500 companies, the platform continues to attract new clients while boosting usage amongst existing ones.

The expansion strategy enveloping Copilot brings with it new vistas, including AI-optimized hardware, reaching nearly 225 million devices and set to drive up revenue significantly in the forthcoming years.

Despite loftier price-to-earning ratios, Microsoft's comprehensive engagement in numerous AI projects signifies the stock as a solid choice for the future-focused investor.

Amazon's Dominance

Amazon, a behemoth in both e-commerce and cloud computing, reflects a robust growth outlook. The e-commerce market is expected to see astronomical expansion, and Amazon is chipping at increasing its margins by streamlining its operational framework.

Concurrently, Amazon Web Terra Services (AWS) is experiencing a rush as businesses migrate and modernize their IT setups, utilizing AWS for both AI advancements and other services. Not to overlook, Amazon's burgeoning advertising avenue has shown promising revenue streams, further consolidating the company's financial platform.

With the lion's share of IT spending still outside cloud services, AWS is positioned to capture significant market share, making Amazon's stock an enticing option for investors eyeing substantial gains.

Microsoft, Amazon, Investing